Equitable Insurance Corp. v. Transmodal International, Inc.

TOPIC: Insurer’s Right of Subrogation

FACTS:

1. Sytengco Enterprises Corporation (Sytengco) hired respondent Transmodal

International, Inc. (Transmodal) to clear from the customs authorities and withdraw,
transport, and deliver to its warehouse, cargoes consisting of 200 cartons of gum Arabic
with a total weight of 5,000 kilograms valued at US21,750.00.
2. On September 2, 2004, respondent Transmodal withdrew the same cargoes and
delivered them to Sytengco's warehouse. It was noted in the delivery receipt that all the
containers were wet.
3. In a preliminary survey, it was found that 187 cartons had water marks and the
contents of the 13 wet cartons were partly hardened.
4. On October 13, 2004, a re-inspection was conducted and it was found that the contents
of the randomly opened 20 cartons were about 40% to 60% hardened, while 8 cartons
had marks of previous wetting.
5. In its final report dated October 27, 2004, Elite Surveyor fixed the computed loss
payable at P728,712.00 after adjustment of 50% loss allowance. 
6. Thus, on November 2, 2004, Sytengco demanded from respondent Transmodal the
payment of P1,457,424.00 as compensation for total loss of shipment. On that same
date, petitioner Equitable Insurance, as insurer of the cargoes per Marine Open Policy
No. MN-MRN-HO-000549 paid Sytengco's claim for P728,712.00.
7. Sytengco then signed a subrogation receipt and loss receipt in favor of petitioner
Equitable Insurance. As such, petitioner Equitable Insurance demanded from
respondent Transmodal reimbursement of the payment given to Sytengco.
8. Thereafter, petitioner Equitable Insurance filed a complaint for damages invoking its
right as subrogee after paying Sytengco's insurance claim and averred that respondent
Transmodal's fault and gross negligence were the causes of the damages sustained by
Sytengco's shipment. Petitioner Equitable Insurance prayed for the payment of
P728,712.00 actual damages with 6% interest from the date of the filing of the
complaint until full payment, plus attorney's fees and cost of suit.
9. Respondent Transmodal denied knowledge of an insurance policy and claimed that
petitioner Equitable Insurance has no cause of action against it because the damages to
the cargoes were not due to its fault or gross negligence.
10. RTC RULING: Found in favor of petitioner Equitable Insurance. It awarded actual
damages in the amount of Php728,712.00 plus 6% interest from judicial demand until
full payment; Attorney's fees & costs of suit.
According to the RTC, petitioner Equitable Insurance was able to prove by
substantial evidence its right to institute an action as subrogee of Sytengco. It also ruled
that petitioner Equitable Insurance's non-presentation of the insurance policy and non-
compliance with Section 7, Rule 8 of the Rules of Court on actionable document were
 raised for the first time in respondent Transmodal's memorandum and also noted that
petitioner Equitable Insurance had, in fact, submitted a copy of the insurance contract. 
11. CA RULING: Reversed the RTC's decision for failure to prove cause of action.
The CA ruled that there was no proof of insurance of the cargoes at the time of
the loss and that the subrogation was improper. According to the CA, the insurance
contract was neither attached in the complaint nor offered in evidence for the perusal
and appreciation of the RTC, and what was presented was just the marine risk note.
12. Hence, the present petition after the CA denied petitioner Equitable Insurance's motion
for reconsideration.

ISSUE:

Whether or not petitioner Equitable Insurance has a cause of action against respondent
Transmodal by virtue of its right of subrogation.

RULING: YES.

A closer look at the arguments raised in the petition would show that petitioner is indeed
asking this Court to review the factual findings of the CA which is not within the scope of a
petition for review under Rule 45 of the Rules of Court. However, this Court has recognized
exceptions to the rule that the findings of fact of the CA are conclusive and binding in the
following instances: … (5) when the findings of facts are conflicting. Considering that the
findings of facts of the RTC and the CA are glaringly in contrast, this Court deems it proper to
review the present case. 

Petitioner insists that the CA erred (when it ruled that a marine risk note is insufficient as
evidence in establishing insurer-insured relationship) because petitioner has presented not
only the marine risk note but also Marine Open Policy No. MN-MOP-HO-0000099 which were
all admitted in evidence.

Indeed, a perusal of the records would show that petitioner is correct in its claim that the
marine insurance policy was offered as evidence. In fact, in the questioned decision of the CA,
the latter, mentioned such policy, thus:

Contrary to the ruling of the RTC, the marine policy was not at all presented. As borne by the
records, only the marine risk note and EQUITABLE INSURANCE CORPORATION Marine Policy No. MN-
MOP-HO-0000099 were offered in evidence. These pieces of evidence are immaterial to Equitable
Insurance's cause of action. We have earlier pointed out that a marine risk note is insufficient to prove the
insurer's claim. …. there is nothing in the records showing that the said policy is related to Policy No. MN-
MRN-HO-005479 which was the basis of Equitable Insurance's complaint. It did not escape Our attention
that the second page of the marine risk note explicitly stated that it was "attached to and forming part of
the Policy No. MN-MRN-005479." Thus, without the presentation of Policy No. MN-MRN-005479, We
cannot simply assume that the terms and conditions, including the period of coverage, of such policy
are similar to Marine Policy No. MN-MOP-HO-0000099. 
As such, respondent had the opportunity to examine the said documents or to object to its
presentation as pieces of evidence. The records also show that respondent was able to cross-
examine petitioner's witness regarding the said documents. Thus, it was well established that
petitioner has the right to step into the shoes of the insured who has a direct cause of action
against herein respondent on account of the damages sustained by the cargoes. "Subrogation is
the substitution of one person in the place of another with reference to a lawful claim or right,
so that he who is substituted succeeds to the rights of the other in relation to a debt or claim,
including its remedies or securities." The right of subrogation springs from Article 2207 of
the Civil Code which states:

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrong-doer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or injury.

The records further show that petitioner was able to accomplish its obligation under the
insurance policy as it has paid the assured of its insurance claim in the amount of P728,712.00
as evidenced by, among others, the Subrogation Receipt,  Loss Receipt, Check Voucher, and
Equitable PCI Bank Check No. 0000013925.  The payment by the insurer to the insured operates
as an equitable assignment to the insurer of all the remedies which the insured may have
against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of any privity of contract or upon
payment by the insurance company of the insurance claim. It accrues simply upon payment by
the insurance company of the insurance claim. 

This Court's ruling in Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corporation is highly
instructive, thus:

As a general rule, the marine insurance policy needs to be presented in evidence before the insurer may
recover the insured value of the lost/damaged cargo in the exercise of its subrogatory right. In Malayan
Insurance Co., Inc. v. Regis Brokerage Corp., the Court stated that the presentation of the contract constitutive of
the insurance relationship between the consignee and insurer is critical because it is the legal basis of the latter's
right to subrogation. 

Nevertheless, the rule is not inflexible. In certain instances, the Court has admitted exceptions
by declaring that a marine insurance policy is dispensable evidence in reimbursement claims
instituted by the insurer.

In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of subrogation accrues simply upon
payment by the insurance company of the insurance claim. Hence, presentation in evidence of the marine
insurance policy is not indispensable before the insurer may recover from the common carrier the insured value of
the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, was held sufficient to
establish not only the relationship between the insurer and consignee, but also the amount paid to settle the
insurance claim. The presentation of the insurance contract was deemed not fatal to the insurer's cause of action
because the loss of the cargo undoubtedly occurred while on board the petitioner's vessel.
In view thereof, the RTC did not err in its ruling, thus:

The above-mentioned case is not applicable in the instant case. In Malayan  Insurance Co. v. Regis
Brokerage, Malayan did not submit the copy of the insurance contract or policy. In the instant case, plaintiff
submitted the copy of the insurance contract. In fact, the non-presentation of the insurance contract is not fatal to
its cause of action.

Perusal of the records likewise show that the defendant failed to raise the issue of non-
compliance with Section 7, Rule 8 of the 1997 Rules of Procedure and the non-presentation of
insurance policy during the pre-trial. In the same case, it was held:

Petitioner claims that respondent's non-presentation of the insurance contract or policy

between the respondent and the consignee is fatal to its cause of action.

We do not agree.

First of all, this was never raised as an issue before the RTC. In fact, it is not among the issues
agreed upon by the parties to be resolved during the pre-trial. As we have said, the
determination of issues during the pre-trial conference bars the consideration of other
questions, whether during trial or on appeal. Thus, [t]he parties must disclose during pre-trial
all issues they intend to raise during the trial, except those involving privileged or impeaching
matters, x x x The basis of the rule is simple. Petitioners are bound by the delimitation of the
issues during the pre-trial because they themselves agreed to the same.

Plaintiff was able to prove by substantial evidence their right to institute this action as
subrogee of the insured. The defendant did not present any evidence or witness to bolster
their defense and to contradict plaintiff's allegation. 

To reiterate, in this case, petitioner was able to present as evidence the marine open policy that
vested upon it, its rights as a subrogee. Subrogation is designed to promote and to accomplish
justice and is the mode which equity adopts to compel the ultimate payment of a debt by one
who in justice, equity and good conscience ought to pay. 

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated

May 11, 2016, of petitioner Equitable Insurance Corporation is GRANTED. Consequently, the
Decision dated September 15, 2015 and Resolution dated March 17, 2016 of the Court of
Appeals in CA-G.R. CV No. 101296 are REVERSED and SET ASIDE, and the Decision dated June
18, 2013 of the Regional Trial Court, Branch 26, Manila is AFFIRMED and REINSTATED.